Cramer: Put PetSmart Stock On Your Radar
Producer
With the Westminster Kennel Club Dog Show currently underway in New York City, Cramer was reminded of how much people love their pets. The “Mad Money” host noted that 62 percent of all U.S. households own a pet, which is equivalent to roughly 71 million homes. In 2010, the pet products and supplies industry was a $35 billion market and it’s only growing.
To play this booming business, Cramer highlighted PetSmart. Headquartered in Phoenix, it is the U.S.’s largest retailer of pet food and pet supplies. It enjoys a 14 to 15 percent share of the $40 billion pet industry.
PetSmart was smart to realize that people want healthy, natural foods for their pets, Cramer said. It has become a higher-end pet store with only 10 percent of its products available in the mass channel. In other words, it sells a lot of exclusive and propriety products that customers are willing to pay up for. It also provides fancy services that have pet owners coming back, such as grooming and a high-end boarding service for dogs. The company also boasts a solid balance sheet and has plans to open another 450 locations in North America.
PetSmart’s stock hit a new high on Monday, but Cramer still thinks it’s cheap given it’s currently selling for 18 times forward earnings with a 16 percent growth rate. But he doesn’t like chasing stocks, so he recommends waiting for a pullback before buying shares.
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